Thursday, December 30, 2010

Did 'You Can Run But You Cannot Hide' get caught up in IRS crackdown on sham ministries?

Annandale-based anti-gay hate ministry led by 'Bradlee Dean' was tied to a religious tax-avoidance scammer in Washington who was prosecuted for peddling 'sham ministries' in 2005. But why did it take until 2008 to begin to sever ties with him?

By Karl Bremer

The Annandale-based homophobic hate ministry You Can Run But You Cannot Hide International (YCR) was organized as a self-described “sham” ministerial trust in 2005 by a bizarre religious group in Washington state that ran afoul of federal tax authorities for setting up such tax-avoidance trusts. Yet the controversial Wright County nonprofit, which paid thousands of dollars to have trusts created for itself and its mysterious sister nonprofit Old Paths Church, continued to operate as a “sham” trust until 2008, when it initiated legal action to sever its ties from the Washington group and its leader, IRS scofflaw Glen Stoll.

What YCR thought it was getting when it signed up for Stoll’s tax-avoidance program—and what drove the organization to take such drastic steps to remove itself from his trusts four years later—is unknown. YCR declined to comment for this article.

Details about YCR’s finances and real estate gleaned from property tax records and court filings raise more questions than they answer about the group’s tax status and its relationship with Stoll, his trust-creating business Remedies at Law, and the Embassy of Heaven, a fanatical religious cult in Oregon.

You Can Run But You Cannot Hide International is run by President Bradley Dean Smith of Annandale, who is better known to his followers as “Bradlee Dean,” and Secretary Jacob McMillian MacAulay, a/k/a "Jake McMillian," the only two paid members on the organization’s board. Other directors include Nicole Bengston, vice president; Heather MacAulay (Jake’s spouse), treasurer, Ron Stone, director; and Todd Bergren, director.

The group describes its charitable purposes and major program activities in its 2009 State of Minnesota Annual Report as “to reshape America by redirecting our youth morally and spiritually through education, music, radio, and street teams.” Much of the organization’s activities seem to revolve around Smith’s “Bradlee Dean” personna and the punk-metal-Jesus band he leads and drums for, Junkyard Prophet.

The group has come under fire in the past for bringing religious proselytization masquerading as anti-drug programs into public schools. More recently, however, YCR has become widely known for the controversial, homophobic on-air rants of Dean and his sidekick Jake on their weekly “Sons of Liberty” radio show, broadcast by local conservative talk station WWTC-AM. It’s through his “preaching” from that pulpit, which cost YCR $35,054 in radio time in 2009, that Smith has garnered the attention and scorn of everyone from Rachel Maddow to Anne Rice.

WELL-COMPENSATED ‘MINISTERS’According to YCR’s 2009 IRS Form 990, Smith was paid $51,303 in compensation and $45,887 in housing allowance last year for a total of $97,190. Not bad for a “minister.” That’s nearly double his 2008 reported compensation of $27,433 (it’s not clear from its tax filings whether Smith received a housing allowance in 2008).

MacAulay was paid $42,028 in compensation and $24,869 in housing allowance for a total of $66,897 in 2009. That’s also nearly double his 2008 reported compensation of $21,522. MacAulay also received a $12,976 “minister’s housing allowance” in 2008. Four other “ordained ministers” with the group received a total of $41,555 in housing allowances.

An independent audit of YCR’s 2009 books stated that the “expected commitment” for ministers’ housing allowances in 2010 is $124,600.

Housing allowances for YCR’s “ministers” have come under scrutiny before. Whether “ministers” such as those employed by YCR would qualify for tax-free housing allowances in the eyes of the IRS is murky at best. The use—and abuse—of this special tax exemption for ministers has been the subject of considerable debate.

The IRS defines “ministers” as “individuals who are duly ordained, commissioned, or licensed by a religious body constituting a church or church denomination. They are given the authority to conduct religious worship, perform sacerdotal functions, and administer ordinances and sacraments according to the prescribed tenets and practices of that religious organization.”

The lofty salaries and housing allowances of YCR’s top two directors/“ministers” were fueled by soaring revenues for the controversial “ministry” from 2008 to 2009.

YCR reported a deficit of $41,478 on total revenues of $385,670 in 2008, according to the group’s IRS Form 990. By the end of 2009, YCR reported net assets of $197,081 on total revenues of $985,319—despite the fact that the group stated on its Form 990 that it did not “undertake any significant program services during the year which were not listed on the prior Form 990 or 990-EZ.”

YCR lists the source of its income on its 2009 Form 990 as follows:

• $473,789 from “contributions, gifts and grants” ($238,338 in “noncash contributions” of vehicles and equipment)

• $444,126 from contributions collected by Street Teams. It claims its street teams “shared the gospel six days per week through the year” and “shared the message of Christ with over 250,000 individuals.” Street team members, each of whom is either a “certificated, licensed or ordained minister,” distribute CDs, DVDs and printed materials from tables set up at gas stations and special events, such as the Michele Bachmann-Sarah Palin rally in Minneapolis April 7 and the 2010 GOP State Convention.

• $29,787 from its annual reception for guests and donors (offset by $17,542 in expenses).

• $18,471 from five school assemblies, where issues including “drugs, alcoholism, suicide, sex, media, our country, our veterans and the Constitution” are covered (offset by $16,778 in expenses).

• $10,684 from contributions at a State Fair booth.

• $8,492 from training or church services conducted “at various churches in and outside the state of Minnesota.”

THE MOVE TO ANNANDALEBradley Dean Smith first set roots in Annandale on November 17, 2004, when he bought a lot on County Road 3 NW from Stephen B. and Barbie Jo Kalash on a contract-for-deed for $160,000. That same day, Smith assigned the contract-for-deed to an entity called “Old Paths Church,” which currently shares the same address as YCR and was registered with the State of Minnesota by Jake MacAulay, YCR’s secretary. The 2005 property tax statement lists “Old Paths Church, c/o Bradley Smith” as the property taxpayer.

Meanwhile, according to 10th District Court documents filed in Wright County, Smith and MacAulay attended classes offered by Glen Stoll of Edmonds, WA, who operated a business called Remedies at Law. There, they were promised they could buy what Stoll said were “established, exclusive, perpetual, irrevocable and assignable ministerial trusts” that would allow them to operate as a ‘free church’ that would be invulnerable to state regulation and control.”

For a fee of $6,500, they were told, Stoll would create three trusts that would give them “absolute tax-exempt status,” eliminate all federal tax return filing requirements, allow donations to the organization to be tax-deductible, and allow the organizations to retain control and enjoyment of all assets of the ministries. They would also be assigned a trustee to deal with all federal, state and legal systems.

According to court documents, Stoll advised his customers to transfer all assets to these trusts, and these asset trusts would be used to issue “grants and other disbursements.” Customers also were advised to stop paying all income and employment taxes and stop filing federal tax returns.Stoll would assist his customers in creating “corporations sole,” entities established by law in some states for churches to hold title to property used in association with church activities. These ministerial trusts then would be created under the corporations sole.

Stoll advised his customers to complete a “Political Profession of Faith” that he claimed would enable anyone to create their own personal ministry. And he would assist customers in getting such things as ID cards from the “Embassy of Heaven Church” in Stayton, OR, which Stoll said helps people sever all ties to government and become “Citizens of Heaven.” The Embassy of Heaven Church, which describes itself as “God’s Government on Earth,” at that time already had a long and controversial history of clashes with government authorities.But Smith’s own “Kingdom of Heaven” ID card, a copy of which was found in court filings, indicates he didn’t need any help from Stoll to get introduced to the Embassy of Heaven cult. His ID card states he was “baptized” on 11-17-02, the ID was issued on 9-30-03 and expired on 9-30-10.Smith’s official record at EmbassyOfHeaven.org states:

“On file is a signed statement by Bradley Smith renouncing allegiance to the world and declaring citizenship in the Kingdom of Heaven.

“We are fellow citizens of the Kingdom of Heaven, the Government of God, which was handed to the Apostles by Jesus Christ at the Last Supper (Luke 22:29), We fulfill the Great Commission by traveling from place to place using old and modern conveyances. Our government is not of this world, and we expect to be held accountable to the laws from which we come. Our conduct is not an offense if it not an offense in the Kingdom of Heaven.”

SMITH, STOLL AND THE FEDSBy April 2005, Bradley Dean Smith began the unusual transfer of property to the new trusts being created by Stoll. Stoll claimed to be a lawyer, but according to the Justice Department, he was not a member of or licensed with any state or federal bar.

A new warranty deed was issued April 29, 2005, for his Annandale property—this one from the original sellers to “Old Paths Church Ministries, State of Washington.” That same day, Smith filed an “affidavit of identity” stating that his earlier assignment of the contract-for-deed should have been to “Old Paths Church Ministries” and not “Old Paths Church.”

About the same time Smith started doing business with Stoll, the federal government swung into action against Stoll’s sham ministry mill.

On Feb.15, 2005, the U.S. Department of Justice filed a complaint against Stoll and his enterprises seeking a permanent injunction to prohibit him from engaging in a whole host of illegal tax schemes and conduct, and also seeking a complete list of all of his customers.

A federal judge issued a preliminary injunction against Stoll on April 26, 2005. The judge’s order also required Stoll to provide the government his customers’ names, mailing and e-mail addresses, and Social Security and telephone numbers, and to notify customers of the injunction.

“People who buy into tax-fraud schemes are buying nothing but trouble—past due tax bills with interest and penalties and the possibility of criminal prosecution,” said Eileen J. O’Connor, Assistant Attorney General for the Tax Division. “The Justice Department and the Internal Revenue Service are committed to stopping the promotion of tax fraud.”

Smith and MacAulay continued transferring assets of YCR and Old Paths Church to the new entities being created for them by Stoll, even after the temporary injunction had been issued against Stoll.

On June 21, 2005, the Old Paths Church Ministries PTA trust was established. Smith was listed as an agent of the trust and a “Director of the Family Defense League,” which was the corporation sole created by Stoll under which two of the three trusts were held.

A permanent federal injunction was issued against Stoll June 27, 2005.

On July 11, 2005, another warranty deed was issued for Smith’s Annandale property, conveying it “as a gift” from Old Paths Church Ministries to Old Paths Church Ministries PTA (Washington State).

YCR, Inc. transferred its assets to a third trust, You Can Run But You Cannot Hide Ministries PTB. Those assets included a 1997 Polaris Indy snowmobile, a 2005 Honda Rincon ATV and a 1994 Prevost bus.

Smith and MacAulay apparently continued to operate YCR and Old Paths Church under the trusts created by Stoller until early 2009. It’s not known whether they followed Stoll’s illegal tax-avoidance advice during those years.

Property tax statements for Smith’s Annandale property from 2006-2009 list “Old Paths Church Ministries PTA, Director Family Defense League Trustee” as the taxpayer. A new house was built on the property in 2006, using a construction mortgage of $336,552 issued to Old Paths Church Ministries and signed by Smith. The property’s estimated market value rose from $92,700 to $361,600.

The year Smith moved into his new house in rural Annandale in northern Wright County, he moved his controversial YCRBYCH “ministry” to downtown Annandale in the city’s former fire hall. He told the Annandale Advocate at the time that his group and band would put Annandale on the national map.

SOMETHING’S FISHYCourt documents indicate that Smith and MacAulay found out about the federal injunction against their friend Stoll in 2008, and that in September 2008, they claim Stoll told them there wasn’t any injunction.

That’s not entirely surprising, since as recently as this fall, according to a Justice Department spokesman, Stoll has continued to thumb his nose at the injunction order’s demands, which included informing his customers on the injunction. Indeed, his Remedies at Law website shows little indication of compliance with the order, and he appears to be continuing to offer some kind of ministerial trust advice.

The Justice Department sought to have him jailed for contempt in June 2006. Stoll remains in contempt of the 2005 injunction order with at least $50,000 in fines hanging over his head.

According to court documents, Smith’s and MacAulay’s attorney advised them to sever all ties with Stoll, demand his resignation from their trusts and return all property from the trusts. Stoll refused, and on December 9, 2008, a summons and petition was attempted to be served on Stoll’s address, where a person there “refused to accept the documents” and “slammed the door.”

In affidavits filed with the court, Smith and MacAulay’s attorney stated that “The trusts that (Stoll) creates for their customers are shams, devoid of economic substance.” Stoll’s “false and fraudulent schemes” induced at least 30 customers to participate in their “illegal schemes” through at least 89 corporations sole and 47 ministerial trusts.

On March 27, 2009, District Court Judge Stephen Halsey granted Old Paths Church, Inc. and YCR, Inc. their motion for a summary judgment against Stoll that terminated Stoll’s trusts, removed Stoll as trustee, transferred assets from the trusts back to the two original entities, and awarded attorneys fees plus the $6,500 they paid Stoll to create the sham ministerial trusts.

Smith purchased the property back from Old Paths Church, Inc. on July 29, 2009, for $349,200. On August 14, 2009, another warranty deed was issued for the Annandale property from Old Paths Church, Inc. to Bradley Dean Smith. The Old Paths Church mortgage was satisfied, and a $367,344 mortgage was registered from Mortgage Depot in Bloomington to Smith. And the taxpayer of record for the former Old Paths Church property is once again listed as Bradley D. Smith.

Smith managed to get a swimming pool installed at his “parsonage” before the title transferred, though. A building permit was issued by Wright County for the pool on June 4, 2009, listing Smith as the applicant and Old Paths Church Ministries as the owner. It’s not known who paid for the installation.

STILL A 'SHAM' MINISTRY?While Bradley Smith and Jake MacAulay may have shed themselves of Glen Stoll and his sham ministry mill, YCR’s critics still consider them to be running a sham ministry.

In a Minnesota Independent report on the group’s ministerial housing allowances last year, a former IRS attorney told reporter Andy Birkey:

“No one can qualify for (the housing allowance) unless they are licensed or ordained ministers … I doubt that all five of the members of You Can Run But You Cannot Hide would meet that requirement. I mean, some of these guys are musicians.”

Added Alex Luchenitzer, senior litigation counsel for Americans United for the Separation of Church and State:

“Are they just five people who just decided to get together or are they ordained by an organized religious body? It it’s the former, it’s probably not what the IRS intended.”

Interestingly, one of the Justice Department’s complaints against Glen Stoll and his sham ministries is that they “falsely advise customers that if their residence or real estate is titled in the name of the ministerial trust, then the participant can use and maintain it as a tax-exempt parsonage or management housing.”

YCR declined to comment on its “ministers” or their housing allowances.

Questions remain about other aspects of YCR.

What is the relationship between the elusive Old Paths Church Ministries and YCR? They share the same address and at least one of the same officers—Jacob “Jake McMillian” MacAulay. Is this the “religious body” that ordains YCR’s “ministers?”

An extensive internet search turns up no references to Old Paths Church in Minnesota or its activities, events or services, other than the former address of the “church” in Plymouth. That address is a small office building housing several small commercial businesses, according to one current tenant, and is not a “church” at all. Old Paths Church, Inc.'s address registered with the Minnesota Secretary of State is identical to the Annandale address registered for YCR with the SoS.

Yet Old Paths Church or Old Paths Church Ministries—they are one and the same, according to court documents—was the taxpayer of record for Bradley Smith's residence in French Lake Township in Wright County from 2004-2009.

On its 2008 and 2009 IRS Form 990s, YCR reported “grants” to Old Paths Church Ministries in the amounts of $43,851 and $37,700, respectively.

A search of the YCR website turns up only one curious reference to Old Paths Church—this “Statement of Faith” that appears to be largely lifted from this "Statement of Faith" for an Old Paths Christian Church in El Paso, TX. However, a spokeswoman for Old Paths Christian Church in El Paso says they have no connection to Old Paths Church—or any other organization—in Minnesota.

YCR declined to comment on Old Paths Church or its relationship with the nonprofit.

Some also question whether YCR crosses the line from ministerial work to political work.

The YCR Articles of Incorporation filed with the State of Minnesota in 2008 state:

“No substantial part of the activities of the corporation shall be carrying on propaganda, or otherwise attempting to influence legislation, and the organization shall not participate in, or intervene in (including the publication or distribution of statements) any political campaign on behalf of any candidate for public office.”

Yet YCR had a booth at a political rally for Michele Bachmann’s congressional campaign April 7, 2010, that featured former half-term governor Sarah Palin. And the group also was invited to set up shop at the 2010 Minnesota GOP Convention.

Perhaps the biggest question looming is whether Smith, MacAulay and their “ministers” lived by the tenets of their tax-dodging sham ministries from 2005 until 2009, when they severed all ties to Stoll and his trusts. Smith’s pursuit of these tax-avoidance trusts, and his renouncement of his allegiance to the world and declaring citizenship in the Kingdom of Heaven suggests that he may have a proclivity toward not paying taxes.

If so, are they now liable for back taxes, penalties—or worse? Or was it an IRS enforcement action that prompted their divorce from Stoll in the first place?

Unfortunately, the only person who can answer all these questions is Bradley Dean Smith, and he’s not talking.

Top photo: Billboard on the outskirts of Annandale, MN, home of You Can Run But You Cannot Hide International.

Middle photo: You Can Run But You Cannot Hide Internatonal's world headquarters downtown Annandale.

Bottom photo: You Can Run But You Cannot Hide's booth at Congresswoman Michele Bachmann's political rally with former half-term governor Sarah Palin last April in Minneapolis.

All photos by Karl Bremer.

Postscript:

If you're interested in learning more about "Bradlee Dean" and his You Can Run But You Cannot Hide "ministry," check out some of the youtube videos of his radio programs, starting with the one below. It's not pretty.

418 comments:

Thanks for researching and writing about this - we've witnessed firsthand how Smith and his crew are scammers - posing as nothing more than a suicide prevention group so random people will give them money. Or posing as a rock band so they can spread their bigoted, religious messages throughout public schools. The thought of all this (along with the fact that my Congresswoman Michelle Bachmann supports them!) makes me cringe.

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At one point we had a similar operation running in my area. During its run it scammed enough money from gullible people to build a gigantic "church" with a huge parking lot for all the "followers". Eventually the so called preacher/leader decided to skip town with the congregations money and last heard of being somewhere in Texas and probably doing the same thing there. The "church" was later picked up for a song and converted into a furniture store.Why "christians" keep falling for this kind of scam is beyond my abilities of understanding.

Where is the scam? If you go to burger king and get a bad hamburger is it the customers fault? You strain at the gnat and swallow a big camel. Sounds like backlash for Bradlee's insistence on exposing the gay agenda? Oh, what a coincidence. Pure backlash.

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Ripple in Stillwater

Ripple in Stillwater is the sole creation of Stillwater, Minnesota, writer Karl Bremer. It covers whatever captures the author's muse at the moment. You can reach Ripple in Stillwater at saintcroix-at-aol-dot-com, or you can follow me on Twitter @kdbremer. If you're wondering about the name of this blog, go here.

Minnesota Society of Professional Journalists 2011 Page One Award Winner

Ripple in Stillwater author Karl Bremer won Second Place in the Minnesota Society of Professional Journalists 2011 Page One Awards for "Best Use of Public Records."

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